Breach of Fiduciary Duties and Restrictive Covenants

The Client 

In the case of Cheshire Estate & Legal Ltd (CEL) v Thomas Blanchfield (first defendant), Mark Montaldo (second defendant) and MTCC Solutions Ltd (third defendant), RSW Law represented the first defendant, Thomas Blanchfield. 

Mr Blanchfield worked for the claimant CEL (a firm of solicitors). He was subsequently engaged by CEL on a self-employed consultancy basis and became a statutory director of the company on 28 September 2022. During his time with CEL, Mr Blanchfield had signed a Non Disclosure Agreement (NDA) and a Consultancy Agreement.  

At some point in or around August 2022, Mr Blanchfield and the second defendant had decided to explore the possibility of setting up their own law firm. MTCC was incorporated on 22 August 2022. Mr Blanchfield resigned in January 2023 and CEL brought a number of claims against him.  

The issues  

CEL claimed that Mr Blanchfield was in breach of his fiduciary, contractual and statutory duties, had misused confidential information and had taken steps to compete unlawfully with CEL. CEL sought injunctive relief and to enforce post-termination restrictive covenants, to prohibit the defendant from using or disclosing its confidential information and, by way of Springboard Relief, to prohibit him from taking advantage of any head start which he might have secured as a result of any unlawful activities carried out whilst engaged by CEL. 

Our approach 

Proceedings were issued on the 1 February 2023 following which, RSW Law were instructed to represented Mr Blanchfield. RSW Law had to act fast and there was an application for interim relief on the 9 February 2023 which was resolved by agreement and thereafter, a 5 day hearing was held in April 2023 at the High Court sitting in Manchester. 

The outcome 

We prepared a robust defence of all claims and represented the defendant at the final hearing. The first defendant succeeded in his defence of all claims.

Breach and conspiracy

The judge found that any steps taken by the defendant were preparatory and held that the steps taken did not constitute a breach of fiduciary/statutory duties and would not have affected the defendant’s ability to serve CEL faithfully, honestly and to the best of his abilities. 

Contractual duties 

There were express contractual duties contained in the defendant’s Consultancy Agreements and NDA, principally concerned with confidentiality. CEL’s case was that the defendant was a consultant, rather than employee, and that he had breached both agreements. However, the judge found that the defendant was not in breach. 

Specialist work and NDAs

The judge held that the fraud work undertaken by CEL was straightforward and technically uncomplicated and did not require specialist legal expertise. The judge also held that the NDAs prepared by CEL for potential funders were designed to discourage competition, rather than to protect any meaningful confidentiality and the judge held that there was not anything unique or indeed truly confidential about CEL’s offering which would justify contractual protection. 

Unlawful means conspiracy 

The judge did not find the defendant was in breach of any contractual or statutory duties. Furthermore, the judge was not satisfied that CEL had established the necessary mental element of the tort. 

Restrictive covenants 

The judge found that there was no evidence that the defendant had tried to solicit clients or customers of CEL or indeed of any other unconscionable behaviour on the defendant’s part, therefore the judge found it would not be appropriate to grant injunctive relief. He also found other aspects of the restrictive covenant were too wide to be enforceable and wider than was necessary to protect CEL’s legitimate business interests. 

Injunctive relief in respect of confidential information 

The judge commented that it was unfortunate that the NDAs and Consultancy Agreements had different definitions of confidential information and held that in both cases the definitions went well beyond trade secrets and information of equivalent confidentiality. 

Springboard Relief  

In light of the other findings, the claim for Springboard Relief was dismissed. The judge also noted that there was no evidence that the defendant had achieved any head-start from dealings with any funders. 

Statements 

Some concern was expressed about a number of statements prepared on behalf of the claimant which failed to comply with Practice Direction 57 of the Civil Procedure Rules.  The judge noted that wholesale disregard of the Practice Direction had the potential to sound in costs at a later stage. 

Summary of outcome

• The interim injunction was discharged. 
• The claims for breach of contract and breach of statutory duty were dismissed. 
• The unlawful means conspiracy claim was dismissed. 
• The claims for injunctive relief in relation to the defendant’s Consultancy Agreement was dismissed. 
• The claim for injunctive relief in relation to confidential information was dismissed. 
• The claim for Springboard Relief was dismissed. 
• The claim for injunctive relief against MTCC was dismissed. 

If you would like to discuss an employment law issue such as breach of fiduciary duties and restrictive covenants, please get in touch.